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Edited version of your private ruling
Authorisation Number: 1012631634256
Ruling
Subject: Residency
Question
Are you a resident of Australia for tax purposes for the years ended 30 June 20YY and 20ZZ?
Answer
No
This ruling applies for the following period(s)
Year ended 30 June 20YY
Year ended 30 June 20ZZ
The scheme commences on
1 July 2011
Relevant facts and circumstances
You are a citizen of Country X and your country of origin is Country X.
For years you lived in Australia on a long term business visa. During this period you spent most of your time physically present in Australia with regular trips back to Country X.
You were granted permanent Australian residency.
You decided to move back to Country X and your spouse moved back to Country X prior to you moving back.
You started making regular trips back to Country X prior to moving back there and since then you spent more days each year in Country X than in Australia.
The purpose of you moving to Country X was to be with your spouse who lives in Country X and to look after your elderly parents and parent in laws. They are currently on a waiting list to be admitted into an aged care community and are expecting to be accepted in the next year or two.
You intend to return to Australia permanently when you have finalised your family affairs in Country X.
You are a director of Australian companies.
You receive a salary and superannuation as Director of one of the Australian companies you are a director of.
You travel back to Australia for short visits to manage your business in Australia.
In the 20YY financial year you spent less than 183 days in total in Australia on three separate occasions. In the 20ZZ financial year you spent less than 183 days in Australia on four separate occasions.
When you return to Australia you stay in a property owned by you. The property is available to you at all times and you maintain items of furniture for the bedroom, dining and living room including a television.
Your spouse spends one month per year with you in Australia.
You have businesses in Country X and also market and promote one of the businesses you are a Director of in Australia.
You submit tax returns in Country X.
You own your own home in Country X and live there with your spouse.
Your assets in Country X include:
• residential home
• numerous investment properties
• two bank accounts
• businesses
Your assets in Australia include:
• residential property that you stay in when you return to Australia - it is not rented out
• household furniture - bedroom, living, dining
• several investment properties
• numerous bank accounts and superannuation
• businesses
Neither you nor your spouse were Commonwealth Government of Australia employees for superannuation purposes.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5
Income Tax Assessment Act 1936 Subsection 6(1)
Reasons for decision
Residency
The terms resident and resident of Australia, in regard to an individual, are defined in subsection 6(1) of the Income Tax Assessment Act 1936.
The definition offers four tests to ascertain whether each individual taxpayer is a resident of Australia for income tax purposes. These tests are the:
• 'resides' test (ordinary concepts test)
• domicile and permanent place of abode test;
• 183 day test; and
• Commonwealth superannuation fund test.
The primary test for deciding the residency status of each individual is whether they reside in Australia according to the ordinary meaning of the word resides. Where it is determined that a taxpayer 'resides in Australia' in accordance with the first test, there is no requirement to consider the other tests. The other three tests operate to broaden the definition of resident beyond the resides test.
The resides (ordinary concepts) test
The resides test considers whether an individual is residing in Australia according to the ordinary meaning of the word 'reside'. As the word 'reside' is not defined in Australian taxation law, it takes its ordinary meaning for the purposes of subsection 6(1) of the ITAA 1936.
The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 3rd edition, The Macquarie Library Pty Ltd, NSW, is 'to dwell permanently or for a considerable time; having one's abode for a time', and according to the Compact Edition of the Oxford English Dictionary (1987), is 'to dwell permanently, or for a considerable time, to have one's settled or usual abode, to live in or at a particular place.'
In considering the definition of 'reside', the court noted in Federal Commissioner of Taxation v Miller (1946) 73 CLR 93 that the term 'reside' should be given a wide meaning for the purposes of section 6(1) of the ITAA 1936. Similarly, in Subrahmanyam v Commissioner of Taxation 2002 ATC 2303, it was stated that the widest meaning should be attributed to the word 'reside'.
The question of whether an individual 'resides' in a particular country is a question of fact and degree and not of law. In deciding this question, the courts have consistently referred to and taken into account the following factors as being relevant:
(i) Physical presence in Australia
(ii) Nationality
(iii) History of residence and movements
(iv) Habits and "mode of life"
(v) Frequency, regularity and duration of visits to Australia
(vi) Purpose of visits to or absences from Australia
(vii) Family and business ties to different countries
(viii) Maintenance of Place of abode.
The weight given to each factor varies with individual circumstances and no single factor is necessarily decisive.
To determine whether or not you are residing in Australia for taxation purposes, it is necessary for us to examine each of these factors in the context of your circumstances.
(i) Physical presence in Australia
It is important to note that a person does not necessarily cease to be a resident because he or she is physically absent from Australia. In Joachim v Federal Commissioner of Taxation 2002 ATC 2088, the Tribunal stated (at 2090):
Physical presence and intention will coincide for most of the time but few people are always at home. Once a person has established a home in a particular place, even involuntary, a person does not necessarily cease to be resident there because he or she is physically absent. The test is, whether the person has retained a continuity of association with the place, together with an intention to return to that place and an attitude that the place remains home.
As indicated in Iyengar v. Federal Commissioner of Taxation 2011 ATC 10-222, (2011) AATA 856 (Iyengar's case), there is usually a requirement that you be physically present in Australia for at least part of an income year to be considered a resident.
In the years ended 30 June 20YY and 20ZZ you spent the majority of your time in Country X. You returned to Australia for short visits, totalling less than 183 days over the two years.
(ii) Nationality
Your country of origin is Country X and you are a citizen of Country X.
(iii) History of residence
You predominantly lived in Australia for years on a long term business visa.
You were granted permanent Australian residency.
You started making regular trips back to Country X and since then you have spent more days each year in Country X than in Australia.
(iv) Habits and "mode of life"
The Commissioner regards a person's habits and daily routines in regard to their domestic and business arrangements as strongly indicative of residency status. This is particularly relevant to determining the residency of a person who enters Australia, but is also relevant in assisting to determine the residency status of a person who leaves Australia.
• you moved back to Country X where your spouse lives and your extended family
• you own a home in Country X where you live with your spouse
• you only return to Australia for short visits
• you lodge tax returns in Country X
• you have been predominantly living back in Country X for a number of years and will not return to Australia for longer periods for at least the next one to two years.
(v) Frequency, regularity and duration of visits to Australia
You return to Australia for short visits to ensure the smooth operation of the business you are a Director of.
In the year ended 30 June 20YY you returned to Australia for less than 60 days on three separate occasions.
In the year ended 30 June 20ZZ you returned to Australia for less than 60 days on four separate occasions.
(vi) Purpose of visits to or absences from Australia
When you return to Australia it is for business purposes as you are a Director of several Australian companies.
You spend most of your time in Country X where your husband lives and you are there to help look after your parents and parent in laws who are elderly.
(vii) Family and business ties to Australia and the overseas country or countries
Family
Your spouse and extended family (parents and parent in laws) live in Country X.
You do not have any family members in Australia.
Business or economic
Assets in Australia
• a residential property (unit) that you stay in when you return to Australia - it is not rented out
• household furniture - bedroom, living, dining
• several investment properties
• six bank accounts and superannuation
• businesses
Assets overseas
• your residential home
• numerous investment properties
• several bank accounts
• businesses
(viii) Maintenance of Place of abode
You own an apartment in Australia which is available for your exclusive use when you return to Australia. It is not rented out while you are living in Country X. It is furnished with bedroom, living and dining furniture.
You and your spouse own a property in Country X which you maintain and live in.
Summary - resides test
You will not be residing in Australia due to the following factors:
• you now live in Country X which is your country of origin
• you are a citizen of Country X
• you own your own home in Country X where you live with your spouse
• you have significant assets in Country X
• you started spending more time in Country X and decided in 2011 to move there permanently
• your visits back to Australia are short in length.
In consideration of the factors outlined above, you will not be residing in Australia for the years ended 30 June 20YY and 20ZZ according to the ordinary meaning of the word 'reside'.
Other residency tests
Even where a taxpayer is not considered to 'reside' in Australia in accordance with the ordinary meaning of the term, the taxpayer will still be considered to be a resident of Australia for domestic taxation purposes where they meet one of the other three residency tests, being the domicile and permanent place of abode tests, 183 day test and superannuation fund test.
Domicile and permanent place of abode
Domicile
A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person may acquire a domicile of choice in another country if they have the intention of making their home indefinitely in that country. The intention needs to be demonstrated in a legal sense, for example, by way of obtaining a migration visa, becoming a permanent resident or becoming a citizen of the country concerned.
Your domicile is Country X because your country of origin is Country X and you are a citizen of Country X. You are not a citizen of Australia but you were granted permanent residency and if you intended to remain in Australia indefinitely your domicile would be Australia. However you left Australia to return to your country of origin and have been living there permanently with only short trips back to Australia since 2011.
Until such a time you intend to make your home indefinitely in Australia, your domicile is Country X.
Therefore you are not a resident of Australia under the domicile test.
183 day
Where a person is present in Australia for 183 days during the year of income the person will be a resident, unless the Commissioner is satisfied that the person's usual place of abode is outside Australia and the person does not intend to take up residence in Australia.
As you were not in Australia for more than one-half of the relevant income years this test is not relevant to your circumstances.
Superannuation fund test
An individual is still considered to be a resident if that person is eligible to contribute to the PSS or the CSS, or that person is the spouse or child under 16 of such a person. To be eligible to contribute to those schemes, you must be or have been a Commonwealth Government employee.
As you and your spouse have never been employees of the Australian government, the superannuation test does not apply to your circumstances.
Conclusion - your residency status
As you do not meet any of the above tests, you are not a resident of Australia.
Your assessable income only includes income gained from sources in Australia and you will be taxed at non-resident tax rates.